"Dark Money" Groups Hit with Largest Fine in History of Calif. Campaign Watchdog

By Juliet Williams
|  Thursday, Oct 24, 2013  |  Updated 3:12 PM CDT
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"Dark Money" Groups Agree to Pay $15M in Calif. Campaign Law Case

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SACRAMENTO, CA - FEBRUARY 19: A view of the California State Capitol February 19, 2009 in Sacramento, California. After days of wrangling, the California State Senate secured the necessary two-thirds majority to pass a $41 billion budget after Sen. Abel Maldonado (R-Santa Maria) broke party lines and voted for the budget. (Photo by Justin Sullivan/Getty Images)

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California's political watchdog agency on Thursday announced the largest fine in its history for campaign-reporting violations and ordered two political action committees involved in the 2012 elections to pay the state's general fund $15 million.

The California Fair Political Practices Commission called the two groups that will pay the $1 million fine "part of the 'Koch Brothers Network' of dark money political nonprofit corporations." The reference is to billionaire brothers Charles and David H. Koch, who have given millions of dollars to conservative causes across the country.

The $15 million in payments ordered to California's general fund stem from separate out-of-state contributions last fall that drew scrutiny from state regulators:

— $11 million that the Laguna Niguel-based Small Business Action Committee received from a nonprofit based in Phoenix called Americans for Responsible Leadership, which received the money from another Phoenix-based nonprofit, the Koch-backed Center to Protect Patient Rights. That group did not report the contribution.

— $4 million that went to the Iowa-based California Future Fund for Free Markets Yes on Proposition 32 through the American Future Fund, which received the money from the Center to Protect Patient Rights. That money also was not reported to the state.

The investigation and the settlement between the state and the nonprofits, to be filed in Sacramento County Superior Court, began with the $11 million contribution last fall to a California group that was fighting Gov. Jerry Brown's November ballot initiative to raise taxes and supporting another one to limit the power of unions. Voters ultimately approved Brown's tax increase and rejected the limits on unions.

Just days before the election, the Fair Political Practices Commission and state Attorney General Kamala Harris sued Americans for Responsible Leadership, which had no history of political activity in California, to force it to disclose the donors behind the $11 million, as required by California law.

The case went to the state Supreme Court just days before the election, and the court ordered the Arizona nonprofit to disclose who was behind the donation. The group threatened to take the case to the U.S. Supreme Court but backed down the day before the election and disclosed it received the $11 million from a group called Americans for Job Security through an intermediary, the Center to Protect Patient Rights. Both are out-of-state, federally registered nonprofits that are not legally required to disclose donors.

The Center to Protect Patients' Rights is run by an Arizona political consultant, Sean Noble. The Washington, D.C.-based Center for Responsive Politics, a nonprofit that tracks the flow of campaign and lobbying money, has reported that Noble is a political operative for the Koch brothers.

"This case highlights the nationwide scourge of dark money nonprofit networks hiding the identities of their contributors," FPPC Chairwoman Ann Ravel said in a statement Thursday. Ravel was appointed by Brown, a Democrat.

In a statement Thursday, the Center to Protect Patient Rights, said the state recognized as part of the settlement that the nonprofit did not intend to conceal any information from the public. Rather, the center said it erred "largely because it had never previously made any contributions" in California.

"The Commission today recognized that CPPR acted in 'good faith' and that there was absolutely no intent to violate campaign reporting rules. Also, the California Attorney General conducted a complete and thorough investigation and agreed that the conduct was unintentional and inadvertent," Malcolm Segal, attorney for the Center to Protect Patients' Rights, said in the statement.

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